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Sunday, July 26, 2015

NAKED SHORTS: How they are crashing all the commodities and as time develops, the equities markets

Submitted by Mac Slavo via SHTFPlan.com,
We’ve seen some significant swings in precious metals over the last several years and if
we are to believe the paper spot prices and recent value of mining
shares, one would think that gold and silver are on their last leg. Last
weekend precious metals took a massive hit to the downside, sending
shock waves throughout the industry. But was the move really
representative of what’s happening in precious metals markets around the
world? Or, is there an effort by large financial institutions to keep
prices suppressed? In an open letter to the Commodity Futures Trading
Commission First Mining Finance CEO Keith Neumeyer argues that real
producers and consumers don’t appear to be represented by the purported
billion dollar moves on paper trading exchanges.
With China recently revealing that they have added some 600 tons of gold to their stockpiles and the U.S. mint having suspended sales of Silver Eagles due to extremely high demand in early July, how is it possible that prices are crashing?
As noted in Mike Gleason’s Weekly Market Wrap at Money Metals Exchange, while it appears that gold is currently one of the world’s most hated assets, the retail public continues to buy at a record pace:

The paper market is telling one story. But the actual physical bullion market is telling quite another.

The U.S. Mint has sold over 100,000 ounces of American Eagle gold
coins so far in July. That’s the highest monthly demand volume
registered since April 2013. And that’s just as of this week. There’s
still another week left to go before the final sales tally for Gold
Eagles comes in for the month of July. It could be one for the record books
with 109,000 1-ounce Gold Eagles sold — with bargain hunters purchasing
6% of the U.S. Mint’s production from Money Metals Exchange.

As for Silver Eagles, the U.S. Mint has given up on trying to keep up
with demand. After brisk sales during the first week of July, Mint
officials suspended deliveries of Silver Eagles to dealers. Sales of the
popular coins are set to resume next week. But we expect the Mint will
be unable to get its act together and keep up with demand.

It’s not clear exactly who is suppressing precious
metals or why, but it is quite apparent that prices on paper exchanges
are completely disconnected from reality, as retail buyers are taking
this opportunity to scoop up gold and silver at prices that are 50% or
more off their highs.
But what happens next? That, of course, is anybody’s guess, but
considering current prices and movements within the context of a broader
economic crisis, there is a precedent for what we have seen in recent
years.We need only look back to the recession of the 1970’s.You’ll notice that gold saw some significant price movements, not dissimilar to what we’re experiencing today. There
were several down swings of 25% or more within the broader gold bull
market. Most notably, take a look at what happened from 1975 to 1976.
Gold shot up to nearly $200 an ounce, only to be pounded just twelve
months later by 50% to a price of just over $100 an ounce.As the crisis accelerated in severity into the late 1970’s,
complete with gas shortages, job losses and geopolitical tensions, we
saw gold explode in value to a high of $850 by January of 1980.
We’re not necessarily suggesting that gold will follow the exact same pattern. But history does rhyme, and the world again finds itself in serious financial, economic, and monetary crisis.
As we’ve noted before, gold is and always has been the historical
asset of last resort for preserving wealth. Should the current crisis
accelerate as we saw in the 1970’s, the value of gold will likely rise
accordingly. We may not be looking at a 700% increase in price like we
did from 1976 to 1980, but there is a distinct possibility that we will
witness serious gains in real value as crisis and panic unfold.
You can’t eat gold and silver, of course. If crisis is coming we have always urged our readers to prepare themselves for disruption to credit-dependent commerce systems with reserves of food, emergency cash
and other supplies. But having a physical asset with real monetary and
barterable value in your possession is certainly an important strategic
consideration going forward.It’s been said that an ounce of gold could buy 350 loaves of
bread in Biblical times. Today, an ounce of gold still buys about 350
loaves of bread. However you slice it, whether the system falls into a
deflationary depression like the 1930’s or an inflationary recession
like the 1970’s, gold will maintain its purchasing power.
Though past performance is not necessarily an indicator of future results, we have over 6,000 years of history backing gold’s legitimacy as a true mechanism of exchange